You open an HSA through your employer's health plan or directly from a bank or insurance company, but only if you have a may have access to high-deductible health plan

An HSA account is a savings account paired with a high-deductible health plan (HDHP). You cannot open one without that plan in place. If your employer offers an HDHP, they usually handle the HSA setup for you during open enrollment or when you first join — you pick the plan, and the employer either assigns you an HSA provider or gives you a list to choose from. If you buy your own health insurance through the marketplace or have a plan that qualifies, you can open an HSA directly with a bank, credit union, or insurance company that offers them.

The account itself is straightforward: you contribute money (up to an annual limit set by the IRS), that money stays in the account until you use it for medical expenses, and any unused balance rolls over year to year. Unlike a flexible spending account (FSA), you do not lose the money at the end of the year. The catch is that you must be enrolled in an HDHP on the date you open the account and stay enrolled to keep contributing.

Key Takeaways

  • You need a high-deductible health plan (HDHP) before you can open an HSA; without one, the account cannot be opened or funded.
  • If your employer offers an HDHP, they usually set up the HSA for you automatically or provide a list of approved providers to choose from.
  • If you buy your own health insurance, you can open an HSA directly with a bank, credit union, or insurance company that offers them.
  • The IRS sets annual contribution limits (which vary by whether you have individual or family coverage), and you can contribute only while enrolled in an HDHP.
  • Money in an HSA rolls over year to year and earns interest or investment returns, unlike FSA funds, which are forfeited if unused.

How to open an HSA through your employer

If your employer offers an HDHP, the HSA setup usually happens during open enrollment or when you first become may be able to access. You will see the HDHP listed among your health plan choices. When you select it, your employer will either automatically enroll you in their preferred HSA provider or send you a list of banks and insurance companies you can choose from. Some employers contract with one provider; others give you multiple options.

Once you pick a plan and an HSA provider, the account opens within a few days to a week. Your employer may contribute money to your HSA as part of their benefits package — this is common and counts toward your annual contribution limit. You can then add your own contributions through payroll deduction, which is the easiest method because the money comes out before taxes and reduces your taxable income for the year.

If you are unsure whether your employer offers an HDHP, check your benefits materials or ask your HR or benefits department directly. They can tell you which plans may have access to and which HSA providers are available to you.

How to open an HSA if you buy your own health insurance

If you purchase health insurance through the marketplace (Healthcare.gov or your state's exchange) or directly from an insurance company, you can open an HSA with any bank, credit union, or insurance company that offers them. First, confirm that your health plan is an HDHP by checking the plan documents or calling the insurance company — the plan must meet IRS requirements for deductible and out-of-pocket limits.

Once you confirm you have an HDHP, you can open an HSA account. Major banks like Fidelity, Lively, and HealthEquity offer HSA accounts online; so do many credit unions and smaller financial institutions. Search for "HSA account" plus your state or bank name to find local options. You will need your Social Security number, proof of HDHP enrollment (usually your insurance card or a letter from your insurer), and a way to fund the account (bank account or debit card).

The application takes 10 to 20 minutes online. Once approved, the account opens within one to three business days. You can then contribute money directly from your bank account or set up automatic monthly transfers.

What documents and information you need to provide

To open an HSA, have these items ready: your Social Security number, proof that you are enrolled in an HDHP (your insurance card, a benefits letter from your employer, or a copy of your marketplace plan confirmation), and a bank account or debit card to fund the account. Some providers also ask for your date of birth and address.

If you are opening an HSA through your employer, HR will usually collect this information during enrollment. If you are opening one independently, the bank or HSA provider will ask for it during the online application. Keep a copy of your HDHP enrollment proof — you may need it later if the HSA provider needs to verify your may be able to access.

Annual contribution limits and how to fund your account

The IRS sets annual HSA contribution limits, which change each year. For 2024, the limit is $4,150 for individual coverage and $8,300 for family coverage. These limits apply to all contributions combined — from you, your employer, and anyone else who contributes on your behalf. You can contribute only during months when you are enrolled in an HDHP.

You can fund your HSA in several ways. If your employer offers payroll deduction, that is the simplest method because the money comes out before taxes and you do not have to file anything extra. You can also contribute directly from your bank account, set up automatic monthly transfers, or make a lump-sum contribution. If you contribute outside of payroll, you will need to report the contribution on your tax return (Form 8889) when you file.

If you turn 55 or older, you can contribute an extra $1,000 per year (called a catch-up contribution) on top of the regular limit. This applies only to you, not to family coverage.

What happens after your account opens

Once your HSA is open and funded, you can use the money to pay for may have access to medical expenses — doctor visits, prescriptions, dental work, vision care, and many other health costs. You typically receive a debit card or checkbook to withdraw money, or you can request a reimbursement from the account after you pay out of pocket.

Any money you do not spend stays in the account and earns interest or investment returns (depending on how your provider invests it). Unlike an FSA, there is no "use it or lose it" rule. You can let the balance grow year after year and use it whenever you need it, even in retirement.

Keep receipts for all medical expenses you pay with HSA money. The IRS can audit your account and ask for proof that withdrawals were for may have access to expenses. If you withdraw money for a non-medical expense before age 65, you pay income tax on the withdrawal plus a 20 percent penalty. After age 65, you can withdraw money for any reason without the penalty (though you still pay income tax on non-medical withdrawals).

What to do if your employer does not offer an HDHP

If your employer does not offer an HDHP, you have two options: buy your own HDHP through the marketplace, or wait until next year's open enrollment to see if your employer adds one. Some employers add HDHP options over time as they review their benefits.

If you buy your own HDHP, you can open an HSA with any provider that offers them. The process is the same as described above — confirm your plan is an HDHP, then open an account with a bank or HSA provider. You will pay the full premium yourself (no employer contribution), but you can still deduct your contributions from your taxes.

Frequently Asked Questions

Can I open an HSA if I have Medicare?

No. Once you enroll in Medicare, you are no longer may be able to access to contribute to an HSA, even if you also have an HDHP. You can keep an existing HSA and withdraw money from it for medical expenses, but you cannot add new contributions. If you are approaching Medicare age and want to maximize your HSA, you can make catch-up contributions before you enroll.

What if I change jobs or lose my HDHP coverage?

You can keep your HSA account even if you leave your employer or switch to a different health plan. The money stays in the account and you can continue to use it for medical expenses. However, you cannot make new contributions unless you re-enroll in an HDHP. If you get a new job with an HDHP, you can resume contributions immediately.

Can I open an HSA if I am claimed as a dependent?

No. If someone else claims you as a dependent on their tax return, you cannot open or contribute to an HSA, even if you have your own HDHP. This rule applies regardless of whether the person claiming you actually pays for your health insurance.

How long does it take to open an HSA?

If your employer sets it up, the account usually opens within a few days to a week after you enroll in the HDHP. If you open one independently online, the account typically opens within one to three business days after you submit your application and provide proof of HDHP enrollment.

Can I have more than one HSA?

You can have multiple HSA accounts, but your total contributions across all accounts cannot exceed the annual IRS limit. If you open a second account, you must report both accounts on your tax return and make sure your combined contributions do not go over the limit. Most people keep one account to avoid confusion.